Contracts - Rescission and Reformation

Question 1

Rescission (FIX CARD)

Answer 1

This is an equitable remedy that voids the contract. Requires original contract to be considered voidable.

2-step analysis:
1) Determine if there are grounds for rescission:
- mistake (mutual mistake of material fact = rescission granted; mutual mistake of collateral/extraneous fact = no rescission; unilateral mistake general rule = rescission denied; exception for unilateral mistake if non-mistaken party knows or should have known of mistake, then that justifies rescission because the mistake is so obvious. Modern trend requires mistaken party to show undue hardship if there’s no rescission.)
- misrepresentation = rescission granted. P must show that they actually relied on the misrepresentation. Negligence of P is not a good defense to avoid rescission. P can still get rescission.
- coercion
- undue influence
- lack of capacity
- failure of consideration
- illegality

Question 2

Timing

Answer 2

If P sues for damages first, rescission is not allowed. But if P sues for rescission first, damages could still be allowed. P must choose between them before judgment.

Question 3

Availability of Restitution

Answer 3

If P has previously rendered part performance on a K, they can compensated or get the property back via restitution even if they pursue rescission of the K.

Question 4

Reformation

Answer 4

This changes the K to conform with the parties’ original understanding.

3-step analysis:
1) Determine valid K.
2) Determine if there are grounds for reformation
-> Mutual mistake = granted
-> Unilateral mistake = denied, same nuances as above. If this party knew of the mistake, that’s fraud.
-> Misrepresentation = reformation granted. Rewriting would reflect subjective intent of parties.
3) Determine valid defenses:
- unclean hands
- laches

Negligence of P, SOF, parol evidence rule, none of these are defenses

Question 5

Rescission: Good Dog

Answer 5

Grounds for rescission

Defenses

Question 6

Reformation: Very Good Dog

Answer 6

Valid contract

Grounds for reformation

Defenses

Question 7

Contracts Remedies Roadmap

Answer 7

P injured?
- Compensatory damages
-> Direct damages vs. consequential, no punitive damages

D benefitted?
- Restitutionary remedies
-> Value of benefit conferred is granted even if more than purchase price

Does P want property returned?
-> Need unique property or insolvent D

Does P want contract performed?
- Specific performance (CCIFD)

Does P want contract destroyed?
- Rescission (good dog)

Does P want contract rewritten?
- Reformation (very good dog)